A plasmid carrying a subgenomic fragment of hepatitis B virus (HBV) encoding the core antigen (HBc) gene has been stably introduced into a human mycoepidermoid carcinoma cell line using a protoplast fusion transfection procedure developed in this laboratory. This cell line was chosen as a model recipient since it exhibits many of the properties associated with normal epithelial cells. Transfected cells producing a low basal level of HBV core antigen exhibit cytotoxic responses. Expression of the HBc gene is observed only when cells are cultured in a complex serum-free media developed in this laboratory for growth of normal human epithelial cells. However, the addition of fetal calf serum does not alter HBc gene expression. Treatment of cultures with 5'-azacytidine further stimulates HBc gene expression to a lethal level. A direct correlation exists between this high-level expression and loss of 5-methylcytosine at a specific DNA site in the promoter region, 280 base pairs upstream from the HBc structural gene. Alteration of DNA methylation levels within the HBc structural gene do not affect expression. Demethylation is necessary but not sufficient for expression since growth under specific conditions is also required. Primary control of the HBc gene is at the level of transcription since quantities of HBc-specific mRNA are well correlated with the observed levels of gene expression. Regulation of the HBc gene with human cells involves a complex interaction between host cell responses to nutritional factors and DNA cytosine methylation levels within the HBc gene promoter.